It’s back to school next week and many young adults will be heading off to further their education, and live on their own for the first time! Managing their finances will be one of the most important challenges they face.
Poor choices with credit cards or student loans could have lasting repercussions and the financial habits developed at this stage will last a lifetime, so it’s important to get started on the right foot.
Personal finance is part of the school curriculum in several provinces and Enriched Academy is actively working with education officials across the country to deliver financial literacy programs to the classroom before students graduate.
If your kids were fortunate enough to get some financial education at school, or you were able to teach them about money matters yourself, they may be adequately prepared. If not, or you think your kids might benefit from just a little more advice, here are some key points they should keep in mind as they start a new stage in their life.
Understand credit and how to manage it. Credit cards are easy to get and there are plenty of "no interest until 2022 offers" out there. Credit cards debts carry crippling interest rates, and "do not pay until 2022" usually means you have to pay 100% by Jan 1 or you are on the hook for retroactive interest (at 20%+) on the full balance from the day of purchase.
Make sure to study the fine print of any credit or loan agreements and know exactly what you are signing. If you get in over your head with debt and can’t pay your bills on time, your credit rating will nosedive and the cost of buying a car or home will skyrocket, even your job prospects could be adversely affected.
Student loans are not free money. A student loan must be paid back, with interest, usually beginning a few months after graduation. Students may receive grants, scholarships, and other bursaries and these should be seen as a way to reduce the amount of student loans required, not bonus spending cash.
Education is an investment and it usually pays a handsome financial and personal return; keeping the cost as low as possible will help maximize that return.
Create a system to allocate your funds evenly for the entire school year. Putting your money for the year in one account and then using the ATM or debit card whenever you "need" something is a recipe for running out of money in late-February when classes end in mid-April!
Set up a hi-interest savings account for the bulk of your money and pay yourself weekly or bi-weekly by transferring in a fixed amount to a no-fee daily chequing account.
Make a budget and track expenses. Make sure you know the timing of big-ticket items like course fees, housing and/or meal plans, text books, even that trip home or ski weekend, and have those funds set aside. For daily expenses, pay yourself weekly or bi-weekly (see above) and get used to living within your means. No matter how much money you make in the future, this is an essential mindset to master.
Tracking your expenses with a budgeting app or a pen and paper will help immensely with managing your spending.
Safeguard your financial information. There are plenty of scammers out there, they are increasingly savvy, and young people are not immune — the bank will not call to "confirm" your account number and online password, and the CRA does not threaten arrest and demand payment of back taxes in Google gift cards!
The government has some great info on protection from frauds and scams
Learning to manage your daily finances and understanding how to build your wealth over the long-term plays a huge role in your overall happiness. Enriched Academy believes that people of any age can learn these skills and we have helped plenty of "older" clients over the years. However, learning these skills at a younger age has a profound effect throughout your lifetime and amplifies the results many times over.
If you work in the field of education and would like to your students learn the financial basics that all young Canadians should know, why not reach out to us at firstname.lastname@example.org with a few details.
We will take over from there and do our best to try and make it a reality. Enriched Academy works with governments, boards of education, and directly with universities, colleges and schools across Canada to deliver practical, engaging and inspiring financial literacy programs.
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